Expected return is the nominal return that would cause the marginal investor to invest in an asset based on the real risk-free interest rate (rrF), expected inflation [E(π)], and expected risk premium for the risk of the asset [E(RP)].
The real risk-free interest rate is expected to be positive as compensation for postponing consumption.
The relationship between the expected return and the real risk-free interest rate, inflation rate, and risk premium can be expressed by the following equation:
1 + E(R) = (1 + rrF) × [1 + E(π)] × [1 + E(RP)]
Nominal Returns of Major US Asset Classes
Real Returns of Major US Asset Classes
Nominal and Real Returns of Asset Classes in Major Countries
Risk of Major Asset Classes
Risk–Return Trade-off
